Pandora shares jumped $1.20, 6.5%, to $21.38 in after-hours trading on Wednesday, following the news. During the trading session, the shares rose $1.03, 5.1%, to end at $21.38 -- an all-time closing high the Internet radio company. Pandora's shares are up 104.1% the past year vs. a gain of 17.2% for the benchmark Standard & Poor's 500 index.

Pandora is a pioneer in the business of streaming of music over the Internet, but the field has been getting crowded in recent years. Apple recently launched a competing service and European start-up Spotify has gained a lot of followers and may be doing an IPO next year.

Kennedy resigned from Pandora in March after a decade leading the company and the board has been looking for a replacement since.

McAndrews brings a lot of ad industry experience to Pandora, something Wall Street likes. In 1999, he took over a small Seattle digital ad agency called Avenue A, and built it into aQuantive, the fastest-growing digital marketing company at the time. Microsoft bought the business for $6 billion in 2007.

He ran Microsoft's advertiser & publisher solutions group until 2009, when he joined Madrona as an investing partner to focus on early-stage technology companies.

"No one better understands the intersection of technology and advertising, which he clearly demonstrated during aQuantive's meteoric rise," said Tim Westergren, Pandora's founder and chief strategy officer.

Still, Microsoft's aQuantive purchase ended badly. Last year, the software giant wrote down almost all of the price it paid for the business.